Maintenance of a flow of revenue is of great importance to many aspects of virtually any on-going business, particularly since consumer demand for goods and/or services must be anticipated in order for the demand to be met. For example, in regard to goods, production and delivery of goods must be sufficient to meet consumer demand as that demand occurs to avoid customers needing to purchase alternative goods to those usually purchased. If alternative goods are purchased, different customer loyalties may develop and market share may be temporarily or permanently lost. Conversely, many markedly superior products, sometimes from relatively obscure producers, have never enjoyed a significant market share because they are seldom available from convenient sources when needed. Ultimately, the value of trademarks may depend, in significant degree, on the ability of consumers to purchase a given product when the product is needed.
In regard to services, both infrastructure and human resources must be sufficient to satisfy peak anticipated demand even though infrastructure often requires very substantial capital expense while the cost of establishing excess capacity cannot generally be recovered or the excess capacity turned to productive use. (The same is true for production capacity for goods although excess production capacity can often be used for production of other products.) Maintaining adequate and perhaps, from time-to-time, excess and underutilized staffing can represent a large ongoing but non-productive cost of operation and management costs to closely match staffing to actual demand may be substantial and carry substantial risk while such management is often deleterious to the reputation of the business. Therefore, accurate prediction of the volume of services that are needed and can be sold is of paramount importance in avoiding unproductive costs that can easily undetermine the profitability of any service provider.
In the real-world marketplace, there will necessarily be a degree of customers switching between alternative products or service providers for products or services that are needed on an ongoing basis (e.g. where demand is substantially inelastic). The switching between brands of goods or service providers is referred to in the retail trade as “churning” and, while some degree of churning is unavoidable due to consumer experimentation in an effort to maximize satisfaction with the value received for goods or services purchased, any business will wish to minimize churning since churning necessarily represents either customers that are at least at risk of being lost, either permanently or for a significant period of time, or additional demand for which adequate production capacity, infrastructure and/or staffing may not exist and, if expenditures are made to increase production capacity, infrastructure and/or staffing to meet increased demand, there is no guarantee that such demand will continue.
The importance of churning to any given business generally corresponds to the net increase or decrease in demand for particular goods or services. In regard to goods, churning may be reasonably well-balanced over a geographically broad market. Automated inventory control from point of sale (POS) terminals also allows many retail establishments to assure that adequate stock is ordered and received to satisfy demand and allows some additional efficiency to be derived from so-called “just-in-time” methods of manufacture and delivery. On the other hand, due to current circumstances in regard to some services and for telecommunication providers in particular, churning is of major importance in regard to infrastructure, much of which has only been recently installed and which is being rapidly expanded. Further, current circumstances of marketing of such services (e.g. current system performance, available coverage area, operability in particular environments, features of newly available devices and the like) tends to encourage churning which appears to continue at a relatively high level. Prediction of churning and determination of customers likely to churn becomes particularly difficult in such a market environment.